Big Changes for the Medical Device Industry
The beginning of a new year is a time when we look back at the progress we’ve made, and also when many of us look ahead and see where we’re going. We ask questions such as: What’s new? How will the current trends shape the future? What can we expect in the coming year?
Specifically, in the medical device industry, we’re poised to see tremendous growth and changes in the very near future. Are you prepared to keep pace? Are you ready to lead?
According to KPMG’s “Medical Devices 2030” study, the global medical device market is expected to grow by more than 5 percent a year and reach $800 billion in revenue by 2030. The U.S. and China markets alone will account for almost two-thirds of that volume.
If your analysis stops there and you build a strategy solely around volume, your revenue will likely fall short of what’s possible. That’s because you’re reacting to the wrong signal.
The growth at your OEM customers will be realized in proportion to their ability to cope with the change that’s happening in their environment. By itself, “change” isn’t a new phenomenon. What is new is the rate, scope and scale of change that we’re experiencing. According to the McKinsey Global Institute, the transformation of society is happening 10 times as fast and at 300 times the scale, or roughly 3,000 times the impact of the industrial revolution.
Therein lies the challenge—and the opportunity.
Just like the OEMs, your real value as a supplier is a function of how well you adapt and support your customer in responding to the changes and challenges they face. Let’s take a closer look at some of the high-impact changes that medical device OEMs are facing and what you can do to adapt and win.
From B2B to B2C
The trend in the coming years will continue to push medical device companies out of their traditional manufacturing (B2B) role and into providing more holistic solutions for their ultimate customer, the patient (B2C). One example is in the area of patient monitoring. In 2016, the number of patients being monitored remotely grew by 44 percent and is projected to exceed 50 million by 2021, while the global market for remote patient monitoring devices is expected to reach $1.9 billion by 2025. This evolution will create opportunities within the supply chain for existing vendors to play a larger role and for new companies to join the supply chain.
Your value as a supplier is proportional to how long you can stay with the customer journey. Here are some ways to do that:
- Get involved earlier through innovative design and proto support.
- Increase your level of vertical integration through complementary processes, assembly and secondary processes (either in-house or through well-defined/integrated partnerships).
- Explore collaboration opportunities within the OEM’s existing supply chain (for example, how can your multi-axis machining company work with its leading injection molder?).
- Explore how you can provide effective (near) real-time support for your OEM customers regionally and internationally.
There will be new vendors in the supply chain that support the evolving product roadmap (for example, wearables). Stay on top of the new entrants. They may prove to be excellent new customers and will benefit from the “street-smarts” you’ve accumulated as the more experienced vendor.
Data, Connectivity, and Analytics
Your OEM medical device customers are adopting a new language around data, connectivity and analytics to support their customers and bring value. Find ways to get informed and involved:
- How can you link your shop to your customers?
- What information/data do they need?
- How can you make it easier for them to get that information, automatically?
- What tools are you using in-house? Machine monitoring? MES/MRP?
If you’re already using tools and techniques that your customers understand, you’re a big step ahead of your competition. On the surface it seems that automating communication with your customer is “impersonal.” In reality, it adds significant value to the customer experience and increases agility.
It’s easier to grow in these markets if you are actually in these markets. Independent of the current geo-political climate, a substantial growth opportunity awaits those companies that proactively explore and pursue customers on a global versus regional basis. It doesn’t automatically mean you must commit to brick and mortar. Talk to someone who has done it, such as a peer in your current or related industry. A great way to attract attention and buzz at your OEM customer is to make it known you’re researching international expansion. A remarkable number of doors will open and opportunities will present themselves.
Pricing pressure will continue to intensify. The antidote for your shop is innovation and agility. How well are you keeping up with the latest technology and manufacturing techniques? How effectively are you leveraging your specific expertise to solve problems in a way no one else has thought of? Is purposeful innovation something you encourage, promote and fund in your company? As you get better, are you getting faster and more flexible?
I’ve been in your shoes. On a good day, medical device customers are very demanding. I know there’s no shortage of things to keep you up at night. However, there’s also never been a better time to grow your business in this space, domestically and internationally, than right now.
I encourage you to challenge your assumptions around the costs and complexity of innovation, change and adapting to your OEM customers’ needs. The resources at your disposal to answer your questions and provide the information you need are vastly larger than you think, and so is the up-side opportunity for your business.
About the Author
Ray is the founder and CEO of Linara International, a strategic advisory firm with expertise in domestic and international manufacturing. Where others see chaos, Ray is known for his ability to see patterns and trends and translate those into innovative opportunities and meaningful business results. linarainternational.com